Group urges Worcester to require mediation in some home foreclosures

City Manager Michael V. O'Brien has agreed to meet with advocates for a city ordinance that would establish a mandatory mediation program for most foreclosures involving local owner-occupied homes.

Mr. O'Brien told the City Council tonight he could not recommend such an ordinance at this time because it would require commitments on the city budget and its organizational structure at a time when it is already experiencing strains.

Instead, he asked the council to endorse legislation filed by members of the local state delegation that would embrace on a statewide basis mortgage mediation as called for in the ordinance.

He said that bill would also address budgetary and administrative concerns raised by city officials regarding the proposed local ordinance.

But Grace Ross, who is with the Worcester Anti-Foreclosure Team, said it could take up to two years for such a bill to make it through the legislative process.

She said people in danger of losing their homes cannot afford to wait that long.

She pointed out that since the Worcester Anti-Foreclosure Team originally broached the idea of the ordinance to the City Council back in October, 403 households in the city went through foreclosure.

“We can't afford to wait; 403 households missed the opportunity to participate in mediation,” Ms. Ross said. “This is something of great urgency. The number of households that would benefit from this is significant.”

Mr. O'Brien said he would agree to meet with advocates for the ordinance in the coming week or so to see if they can work out their differences.

The proposed ordinance, which was initially brought up by some city councilors in October at the urging of the Worcester Anti-Foreclosure Team, is intended to reduce the number of vacant properties by requiring mortgage lenders to negotiate with homeowners through mediation in the hope of avoiding foreclosure.

A similar ordinance was enacted in Springfield and its legality has been upheld in the courts.

City Solicitor David M. Moore said if the mediation is undertaken in good faith but not successful, the lender would obtain a certificate of mediation and could complete the foreclosure process.

But if the mediation is successful, he said, the lender would be required to re-negotiate the mortgage and the homeowner would avoid foreclosure, he said.

Lenders who violate the ordinance by proceeding with foreclosure without a certificate of mediation would be subject to a $300 per day fine, the solicitor added.

Mr. Moore said the ordinance would require the city to establish a foreclosure mediation program and make regulations necessary to implement such an ordinance.

He said it would also require the city to identify, contract with, evaluate and supervise one or more highly specialized nonprofit organizations to conduct the mediation program.

“Although the program would eventually generate some funds through the fees assessed to the mortgage holder, there is, obviously, no existing appropriation to start the program,” Mr. Moore wrote in a report.

The city already requires a $5,000 bond from banks that foreclose on properties to cover any costs the city may have to incur to maintain those properties.

Councilor-at-Large Joseph C. O'Brien asked whether $500 from that bond could be set aside to fund the mediation program.

Meanwhile, Councilor-at-Large Frederick C. Rushton said he understood the manager's concerns, but added he thinks the city can make the new ordinance work. He said it is worth the money to be able to keep families in their homes through foreclosure mediation.

District 3 Councilor George J. Russell said if the city can spend more than $100,000 to purchase a new Zamboni machine for the DCU Center, then it should be able to spend the money needed to fund two positions for the mediation program.

“If we can save just one family from foreclosure, we've done a great service for that family and the neighborhood they live in,” Mr. Russell said.